The Dow Jones Industrial Average dropped 157.13 points (0.62 per cent) to 25,178.61, while the broad-based S&P 500 shed 3.55 points (0.13 per cent) to 2,783.02.

Wall Street stocks opened well on continued positive momentum from last Friday's strong jobs report, but the tone quickly shifted as investors took note of sharpening rhetoric on international trade.

European Trade Commissioner Cecilia Malmstroem said the trading bloc would "stand up to bullies" after President Donald Trump threatened to tax German cars if the European Union doesn't lower barriers to US products.

Trump provoked the Europeans still further in a tweet saying his Commerce Secretary Wilbur Ross would speak with the EU side "about eliminating the large tariffs and barriers they use against the U.S.A."

Art Hogan, chief market strategist at Wunderlich Securities, said the back and forth reignited worries about a trade war that had receded somewhat after Trump indicated more flexibility on imported steel and aluminium.

"Now, when we start to hear about possible retaliation, it becomes a concern again," Hogan said.

Boeing and Caterpillar both dropped more than two per cent, while United Technologies shed 1.9 per cent and Honeywell International 1.3 per cent. All are major exporters that could be hurt if escalating threats become reality.

Among Nasdaq companies, both Apple and Amazon gained around one per cent, while Tesla Motors jumped 5.6 per cent.

But Netflix dropped 3.1 per cent after Citron Research said the streaming company was overvalued and should be "shorted," meaning investors should bet it will fall.

Broadcom shares jumped 3.6 per cent after a Wall Street Journal report that Intel is considering bidding for the chip company, which has undertaken a hostile campaign to buy Qualcomm. Intel fell 1.3 per cent.

Goldman Sachs gained 1.0 per cent after announcing that co-president Harvey Schwartz would retire, leaving David Solomon the sole president and next in line to become the investment bank's next chief executive.

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Riyadh Daily, published by the Al-Yamamah Press Establishment, is the first English daily published from the Saudi capital. Along with its sister publication, Al-Riyadh Arabic newspaper, Riyadh Daily has a long history in the Kingdom’s media industry. It was first published as a newsletter in the 1960s before it was developed into a broadsheet in 1985.